Keep long term view in Gati, says Nooresh Merani

Nooresh Merani, CEO at Analyse India told CNBC-TV18, "If you look at the operational performance that Gati has come out with, the earnings before interest, taxes, depreciation and amortisation (EBITDA) margin came in close to 8.1-8.2 odd percent, but what has happened is with the investments, they are probably doing an expansion of their network pipeline. That is probably taking a toll on how their bottomline and the margin performance is pan out.""In terms of how the realty business has panned out for Gati, we are still assuming an annuity loss of around Rs 40-45 odd crore. On the e-commerce business, you have probably seen some improvement happening on a quarterly run-rate basis and that has probably happened because of the kind of sheer volume growth that we are probably witnessing in the e-commerce industry.""I think e-commerce has held up pretty well, the investments that they are doing even on the warehousing front, related to their Kausar business, even that is going to take some amount of toll on to the return ratio, so you are going to see a very slow and gradual recovery when it comes to earnings from Gati on a consolidated basis. They have actually cut down on the pincodes as well in the non-profitable routes that they used to cater to.""There is a consolidation plan in place. You are probably looking at, as I mentioned earlier, the network being improved and that expansion is entailing higher capital expenditure (Capex) and probably a tent on the return ratio. So, the investor needs to have a view of more than 2-3 years to say the least. And again, goods and services tax (GST) implementation is going to be a huge kicker for stocks like Gati. When that happens is a big question mark, but when it does happen, that is going to be a huge booster for earnings. From an interim point of view, the earnings will be under pressure, so one has to keep that patience into the stock and a long-term view of at least two years," he said.